Long
had Williams apply as a minority — woman — at the
state's Department of Housing and Community Development for a
Community Development Block Grant, which are administered through
the counties.
The
grant is a taxpayer-funded program for beginner businesses.
The
program requires the participants to hire low income, disabled,
or minority people. As part of the incentive, the on-the-job-training
program reimburses half the employees’ wages. The state
is especially receptive to minorities applying for the grant
loan.
"If
Williams goes in as a woman minority, she'll be granted the loan, “Long
wrote in a letter dated Nov. 1, 1992, to then county administrator
Paul McIntosh. “ Their financial plan assumptions appear
to be realistic and perhaps conservative. Stone will remain associated
with the project."
The
EDC was the go between to handle the process.
The
Well-known Secret
Business
owners say it has been the best-known secret in the business
world that the EDC its members rather than expanding the county’s
employer and tax base.
The
Reporter’s investigation revealed that since the EDC’s
inception a decade ago, the county Board of Supervisors had allocated
nearly $3 million public funds to it for recruiting new business
to the county. Yet, the paper trail reveals that the EDC was
using those public funds exclusively to benefit the contributing
members.
Such
was the case with ATP, says Williams. She and Stone assert that
they were told to lease space from Cemo Inc., a $5,000 contributor
to county supervisors’ elections.
ATP’s
bank account had to be with Sierra Western, a $1,000 contributor.
Williams said Long and county CAO Paul McIntosh told her to locate
in to the Cemo complex and that she had to pay for improvements,
which according to Williams were completing an unfinished building.
“We
had to install the walls, electrical, carpeting, and so on,” said
Williams. “When we squawked, we were repeatedly reminded
that to get the funding, we had to do what the EDC required of
us.”
According
to ATP records and Maureen Valdez, its former bookkeeper, Williams
and Stone spent some $80,000 to complete Cemo Inc.'s structure
in then turn it in to a posh office. The Reporter’s investigation
revealed this was a standard practice by the EDC for its members.
Too
Many Red Flags
Experts
that The Reporter consulted have raised numerous red flags about
the ATP business plan and funding, citing the company would not
and could not have succeeded as structured.
ATP
had received several loans from the Bank of Amador without collateral.
When
The Reporter asked Williams how she acquired the loans, she said
she could not recall nor, could she recall why the county did
not record a lien on her home, as was required in the EDC contract.
"The
county's delay in providing the funding is what caused the collapse
of my company,” Williams said. "Western Sierra Bank
would not invest the $200,000 until we had the grant funding
secured.
We
had to borrow from the Bank of Amador until the grant money came
in. The situation just kept getting worse and everything was
rolling out of control."
The
Reporter asked Teri Chisolm, a financial analyst with Chisolm & Dean,
Inc. to conduct a forensic audit of the EDC documents and ATP’s
loan.
Chisolm
raised many red flags, such as all the loans without collateral
and how Stone and Williams qualified for the grant funding when
they did not meet the criteria.
Chisolm
says one of her backgrounds was preparing grant applications
and assuring compliance for the Placer-County-based Steinbeck
Development, Inc.
“The
standard CDBG procedure is that the investor deposits their money
in an escrow account before the grant funds are released,” Chisolm
said. "The question everyone should be asking is how does
a woman with an average annual income of $22,000, and has only
$40,000 equity in her home, qualify for all these loans? I am
incredulous that the county and the Bank of Amador kept advancing
her money, let alone El Dorado County officials. Where are the
state auditor’s in all this?"
Former
county property manager, Rich Buchanan echoes Chisolm’s
sentiments and adds that that Williams and Stone collectively
lacked the background and collateral for the business venture
they proposed.
Buchanan
says what has caught his eye is that any lender would advance
money to a Williams, who had three existing deeds of trusts totaling
$176,000 against her Church Street home in Amador City, which
is assessed at $215,000.
The
Money Trail
Valdez asserts that she was raising the red flags when Stone and
Williams had her issue checks for upwards of $30,000 to Canadian
bank accounts in Stone and Williams’ names.
“I
had a bad feeling all along that something wasn’t right
with this picture,” Valdez the former bookkeeper said. “They
had me write on the checks and note in the books that it was
reimburse for loans they made to the company.”
The
funds used to repay those loans were taxpayer funds from the
grant, which legally cannot be used for repaying any loans.
According
to the property profile from Amador Title, on February 15, 1992,
Williams and Stone signed two separate deeds of trust totaling
$150,000 on the home. Then on July 24, 1992, Williams and Stone
filed a $36,000 deed of trust against their home.
When
The Reporter asked state officials why they approved a project
without collateral, they expressed alarm at learning that the
loan stated the money was for cash flow rather than equipment,
according to Richard Nelson, deputy director for the California
Department of Housing and Community Development. The state expects
counties to use the equipment for collateral.
"We
do not interfere with the counties' lending procedures,” Nelson
said. "We could ask the county for repayment on the loan.
We've made it clear in our agreement with them that they must
perform due diligence to recover the money."
In
a telephone conference with Nelson and John Turner, program manager
for the state housing department's economic development allocation,
they said the ATP issue was unusual and the 10-year program has
had a 90 percent success rate.
The
program, which began in 1985, averages seven loans per year with
an annual budget of $3.5 million.
"This
deal went sour fast,” Turner said. "We’re alarmed
to now be learning what really happened and we will do our own
investigation. El Dorado County is missing out on potentially
$800,000 for other projects because it messed up."
Buchanan
points to a letter dated Nov. 17, 1992, from Long to McIntosh
stating the county supervisors should place McIntosh in charge
of all aspects of the ATP loan. Buchanan said the normal procedure
is to have the county contract manager and the county property
manager in charge.
He
says the smoking gun is that the county supervisors and CAO conspired
to keep the transaction with ATP under the radar.
"We
were kept out of the loop,” Buchanan said. "Why would
the county keep someone that knew what they were doing, out of
the process? If we had been allowed to do our jobs, I would have
denied the application because Williams had no experience, no
equity in her home, and no secured investors."
ATP’s Collapse
"If
ATP thought it was only receiving $450,000 from the grant, then
why did it end up with a $1.5 million debt?” Chisolm said. “It
spent more than it expected to receive.”
Add
the $450,000 taxpayer loan; the $105,475.84 income from ad sales;
$40,742.15 from the taxpayers for employee training; $36,000
home equity loan Williams said was used for start-up cost; the
$120,000 she took from Foothills Newspaper's account; and the
unpaid bills; and ATP went through $1.5 million to publish three
issues of Hi Sierra!
“I
want to know about the funding from Foothill Newspaper,” said
Frank Stephens, its publisher. “Williams and Stone had
a contract with me to form a joint venture. Before I know what’s
happened, the bookkeeper informs my money is was used to pay
Williams and Stone in their Canadian accounts. The DA’s
office tells me its not a crime and I should buck up and take
it like a man – sometimes businesses fail.”
Factoring
in the taxpayers' cost for the county’s lawsuit against
Williams, the county and state's cost of administering the loan,
the federal courts' cost to handle the bankruptcy, and the taxpayers
have paid $1.2 million for ATP.
The
county actually borrowed $483,750 from the state. It kept $33,750
for program administration. Since then, it received an additional
$28,817.73 to handle the case. As a condition of its contract
with the EDC, the county was supposed to pay them $28,500, but
paid $3,500.
The
state department of housing has since conducted an audit on the
county's method of handling the grant loan and found six problems
and incorrect procedures, it told The Reporter.
It has issued a letter of warning to the county stating: “the
county and the economic development corporation commingled grant
funds with program income with no separate accounting for general
administration. In addition, the county had not timely filed its
quarterly reports.
"The
Economic Development Council prepared the financial reports,
but unfortunately the county did not reconcile the reported amounts
to their accounting records."
A
New Venture
ATP
had also formed Travel Communications Inc. and it became a 51
percent shareholder of Foothills Newspaper Inc., owner of The
Reporter newspaper. Frank Stephens was the other shareholder.
“Their interest was an agreement to do the production and printing in exchange
for the shares,” Stephens said. “They never paid anything.”
Williams'
first payment of $10,946 for the grant funds bounced. McIntosh
and county counsel Sam Neasham went to the Hi Sierra office and
talked to Williams and Stone.
The
company's accountant, Maureen Valdez, told The Reporter that
the four were in Stone’s office for several hours and that
their voices were often intense and loud.
After
McIntosh and Neasham departed, Stone and Williams had Valdez
prepare the paperwork for them to relinquish their shares in
Foothills Newspaper Inc.
Later
that afternoon, the sheriff's deputies served Williams with an
injunction that prevented her from transferring assets. The deputies
took the furniture and equipment. County counsel seized Williams'
and Stones' Foothills Newspaper stock claiming they used grant
money to purchase The Reporter. That was later proven false.
According
to The Reporter’s accounting records, Williams and Stone
withdrew $120,000 from The Reporter’s account.
Stephens
said he was not aware of the withdraw of his funds until it was
too late. He took the cancelled check to the El Dorado County
District Attorney’s Office, but was purportedly told it’s
not a criminal matter.
“DA
Gary Lacy said he does not do white-collar crimes because there’s
no victims,” Stephens said. “They funneled my money
into Canadian bank accounts. Employees had bounced payroll checks.
Taxes deducted from employees’ checks not paid into the
system. Medical expenses deducted from employees’ checks,
but not paid to the carrier. There was so much fraud, but, the
DA refused to investigate or prosecute. One employee was living
out of her car because she lost her home.”
Stephens
said his outrage is that instead of prosecuting Williams and
Stones, the county filed a civil lawsuit against the corporations,
for breach of contract. Additionally, it sued the defunct economic
development corporation for breach of contract. Williams and
Stone counter sued for breach of contract asking for $1.3 million.
"I
had no idea it was going to get ugly,” Williams said. "That
was a boiler plate charge that was politically motivated."
Stephens
and Valdez say they cannot believe that the county DA has not
filed criminal charges for the transfer of the taxpayer money
in to foreign bank accounts.
The
bank records show ATP checks for $30,000 deposited to the Canadian
accounts in Stone's name. Williams told The Reporter that those
checks were reimbursement for her and Stone’s start up
costs.
The
Fall Guy
In
a turn about, the county and ATP filed a settlement agreement
in superior court, that states Williams accepted personal responsibility
and that she agreed to pay the grant loan, plus the interest
of $493,801.89, but the county would wait one year before pursuing
her assets.
"It
was all political,” Williams said. "The county wanted
a pound of flesh and I was the one."
The
EDC Economic Development Inc. dissolved and Long now sells real
estate.
“I
feel we were the fall guys,” Long said. “The county
dumped it all on us.”
Neither
McIntosh or Neasham would comment on the record about ATP.
Getting
Stone
County
attorney Tom Cumpston said Stone was not included in the lawsuit
because, “We didn't have a legitimate claim against him,
so, we released him from liability.”
According
to Valdez and ATP records, however, Stone was an integral part
of the company operations, negotiating with vendors, writing
checks, and hiring, training, and supervising staff. Some employees
said he was there daily and functioned under the name of Fraser
Bridges.
“We
were answerable to Bridges, who was our boss, said Suzie Jackson,
a former ATP employee. “I can’t believe what they
are getting away with. They have so messed up our lives and none
of us has gotten justice.”
The
county's audit showed that ATP had written many checks to Stone,
who days later wrote an equal amount from his personal account
to Williams. At the time the county did the audit, it was not
aware that Stone was Bridges.
"When
I asked for his paperwork to process him, Williams told me to
never mind because he is a Canadian citizen,” Valdez said.
Buchanan
points out that the county is either incompetent to not have
noticed the undocumented Fraser Bridges, or, it was a political
cover up.
Washing
the Crime Away in Bankruptcy Court
Despite
evidence of the massive crime, the bankruptcy court allowed Williams
and ATP to wash their hands of the crimes. In doing so, it prevents
the taxpayers and the victims from suing Williams or recovering
the money in any way.
Tom
Parker, El Dorado County's collection attorney, told The Reporter
he did not challenge Williams’ bankruptcy because he thought
she had no assets.
The
state, however, is not satisfied and refused to give the county
loans until it recouped the money and proves it can administer
a loan.
“No
more economic grants until it clears up this mess,” Conner
said. “The county is still responsible for collecting the
money. These people should not be allowed to wash their hands
of the whole affair in bankruptcy court."
He
added that the state had two other failed companies that borrowed
grant loans. They repaid between 50 cents to 70 cents for every
dollar borrowed.
To
date the county has collected $9,005, according to Sheryl Jodar,
principal administrative analyst in the county administration
office. That payment came from the settlement with the economic
development corporation.
Stephens
filed a second Whistle Blower complaint but this time with the
U.S. Justice Department's watchdog division over the bankruptcy
system, in the Eastern District of California.
He
gave them the bookkeeping and tax records, a copy of the above
news article, and the court order finding ATP and Williams guilty
of fraud. The evidence showed all the money funneled into Canadian
bank accounts.
Stephens
says he still waiting to hear from the Department of Justice
about the evidence.
//
|
This
story has it all: corporate greed, fraud, bankruptcy fraud, and
shareholders' cry for justice falling on deaf ears. Yet, top
officials in the bankruptcy system fled their jobs.
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on how to sue a bankruptcy trustee. If you need a 
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Don't
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